Bio-Rad Laboratories, Inc. et al. v. 10X Genomics, Inc. (D. Mass. 19-cv-12533).

In this long-running, multi-district dispute, Bio-Rad accused 10X Genomics of infringing a number of patents, and 10X filed counterclaims alleging antitrust violations based on Bio-Rad’s patent enforcement practices.  10X says that Bio-Rad is improperly exploiting its market power in two types of genetic analysis and in the market for genetic droplet research technology.  Judge Young has denied in part and granted in part Bio-Rad’s motion to dismiss these counterclaims pursuant to Rule 12(b)(6). 

10X asserted that Bio-Rad had acquired several companies holding patents in ddPCR technology that allows for more accurate and sensitive gene sequencing, and that Bio-Rad controls more than 90% of the market in this technology, allegations which are assumed to be true for the purposes of analyzing the motion to dismiss.  10X asserts that it and Bio-Rad together make up the majority of the Droplet Single-Cell Product market, which dominates single-cell NGS sample preparation.  Finally, 10X says that Bio-Rad will be a monopolist in the Droplet Genetic Anaysis Technology market that covers broadly all droplet-based genetic analysis, if Bio-Rad’s claims are construed as broadly as Bio-Rad asserts.  With respect to all three categories, 10X asserts that Bio-Rad’s acquisition of RainDance Technologies, Inc. in 2017 led to near-monopoly market power both by eliminating a competitor (Bio-Rad eliminated RainDance’s competing product lines upon completion of the acquisition) and by consolidating patents in the technology areas.  10X also asserts that Bio-Rad is trying to drive 10X out of the market through aggressive patent litigation, including through the assertion of the patents acquired from RainDance and refusal to license at reasonable rates.  All of the antitrust counterclaims were brought under Sections 7 of the Clayton Act, 15 U.S.C. 18 (which bans the acquisition of sock in a company when the effect may be substantially to lessen competition or to tend to create a monopoly) or Section 2 of the Sherman Act, 15 U.S.C. 2 (making it illegal to monopolize or attempt to monopolize any part of trade or commerce among the several states).  To properly state such a claim, 10X is required to assert both the possession of monopoly power in a relevant market and the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historical accident.

Judge Young first denied Bio-Rad’s bid to bar the counterclaims as compulsory claims that should have been brought in the parties’ on-going litigation in the Northern District of California.  He noted that the Supreme Court has determined that antitrust counterclaims in a patent infringement case are permissive rather than compulsory, and that the District of Massachusetts continues to view patent misuse claims to be permissive (despite having determined that antitrust claims based on the assertion of invalid patents were compulsory).  Judge Young then applied the Noerr-Pennington doctrine, which protects activity relating to petitioning the government from antitrust liability, applied to enforcement of patents through litigation.  Two exceptions exist to this doctrine – the assertion of patents obtained through fraud and assertion of patents as a sham – is objectively baseless – to cover impermissible anticompetitive conduct.  He noted that so long as the litigation is not baseless, this doctrine shields litigation even if it is brought with the intent to harm a competitor.  Judge Young declined to bar 10X’s requested remedy of divesiture by Bio-Rad of the RainDance patents under the laches doctrine, opting to adhere to the Ninth Circuit’s determination that laches should not apply until at least four years had passed since the cause of action accrued, based on the statute of limitations found in the Clayton Act.  He further determined that 10X had properly pled the technical elements for the market definitions, while noting that they “barely cross the required threshold of specificity.”

With respect to the DSCP market, Judge Young noted that market power traceable to a previous merger can serve as the basis for a violation, but that RainDance was never a major competitor in the DSCP market and thus the acquisition was not the source of any market power that Bio-Rad may now have.  He further faulted 10X’s claim because 10X asserted that Bio-Rad had only entered the NGS Sample Prep market after acquiring RainDance, noting the unlikelihood that the acquisition of patents to enter a market was unlikely to form a violation of the Clayton Act.  He also pointed to 10X’s assertion that 10X, not Bio-Rad, held the most market share in the DSCP market at the time the counterclaim was filed; while 10X asserts that the two parties dominate that market, the pleadings suggest that Bio-Rad does not hold a monopoly share and provide no way to determine what percentage of the market Bio-Rad actually controls.  Absent a showing of market power, the acquisition of competitors or patents cannot serve as a Clayton Act violation.  Further, while 10X asserted that Bio-Rad charged supracompetitive prices, it provided no specificity to allow this allegation to be evaluated.  Judge Young determined that the bald allegation of supracompetitive pricing constituted a legal, rather than factual assertion, and moreover that 10X had made no connection between any such overpricing and Bio-Rad’s acquisition of RainDance, likely because (as noted) RainDance was not in the market at the time of the acquisition.  Judge Young concluded that the antitrust claims should be dismissed with respect o the DSCP market. 

The outcome was different for the Droplet Genetic Analysis Technology market, with Bio-Rad’s requested dismissal being denied.  RainDance had competed in this market prior to the acquisition, and 10X alleged that the acquisition removed a potential competitor and left Bio-Rad with a dominant market share, and had immediately raised royalty prices upon obtaining the additional patents, indicative of newly-acquired market power.  Judge Young determined that 10X’s antitrust claims based on the assertion of patents in litigation, noting that patent litigation is not forbidden by antitrust law, because 10X would have been subject to litigation regardless of who owned the patents, as evidenced by the fact that prior to the acquisition, RainDance had asserted some of the patents against 10X.  Nevertheless, the Clayton Act count with respect to this market was allowed to proceed.

With respect to the ddPCR market, Judge Young noted that 10X’s allegations that Bio-Rad had increased its market share above 90% through the RainDance merger formed a classic example of conduct negatively impacting competition through monopolization behavior.  Accordingly, this count was upheld.

With respect to the Sherman Act counts, allegations that a dominant competitor acquires a patent (or patents) covering a substantial share of the same market can constitute monopolization, provided the claimant can show a specific intent to destroy competition and a predicate illegal act.  10X could not make this showing.  Most of 10X’s theories of how it was harmed were not the result of anticompetitive action, and the series of patent litigation cases filed by Bio-Rad are protected by the Noerr-Pennington doctrine from antitrust scrutiny.    Judge Young denied Bio-Rad’s motion with respect to the ddPCR market, given the already-dominant position Bio-Rad held prior to the RainDance acquisition, but granted the motion with respect to the other markets.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s